Month: March 2013

Anyone familiar with the history and development of the online gambling industry knows the brand 888.com. The early beginnings of this formidable gaming empire started in the mid to late 1990s. Old timers might recognize 888.com as casino-on-net.com, which operated in union until a branding decision was made to solely push 888.com. Then it was off to the races: 888.com casino, poker, and sports were all developed and loaded the coffers of the company owners. The Casava Casino Software was mostly kept in-house, and only licensed to white label operators with strong marketing abilities.

By 2006, 888.com was roaring along, welcoming players from around the world, including the USA. Then, when UIGEA of 2006 was made law, they respectfully bowed out of the USA market. The loss of American gambling dollars did slow them a bit, but they foraged ahead into the fully legal European markets, particularly the UK. Casino affiliates probably remember various dust-ups over what would happen to their players and income. When 888.com left the USA, they practically closed up shop overnight, leaving many affiliates feeling jilted and used.

Between 2006-2012, 888.com cruised along building its presence in alternative markets. They translated their casino into more than 15 different languages, including Chinese. This allowed them to tap the burgeoning Asian market, whose superstitious players recognize the number “8” to symbolize wealth and prosperity. Meanwhile, 888.com disavowed all ties to any illegal online gambling activity in the USA, choosing instead to keep a remarkably clean record with European gaming authorities. The Gibralter based business has never been sanctioned by any regulatory board. Further, operating in Gibralter for any length of time proves (more or less) that the company is solvent, since this jurisdiction has some of the strongest regulation in the world.

On March 22, 2013, the Nevada Gaming Commission unanimously approved 888.com for entry into the fledgling Nevada online gambling market, soon to reach most people in the USA.

Legal counsel for 888.com cited its spotless record of operation in Europe, successful partnership with Caesar’s Entertainment, and $0 of debt liabilities. Yes, that’s right ZERO money owned to anyone. Additionally, 888.com agreed to hold enough money in the United States to cover 100% of American player balances, a reserve requirement setup by the Nevada Gaming Commission to ensure transparency and trustworthy business operations.

So everything pre-UIGEA 2006 is forgotten? Big Money DOES talk!

Anyone in the land based or online casino industry knows that 888.com operated in a legal gray area for many years in the USA before the 2006 UIGEA chased them out. Were they technically breaking any laws? Not at the time. Did they circumvent tax collection and other reporting requirements as a business profiting from United States customers? Maybe. Was the decision to formally leave the market in 2006 a good one? Absolutely.

Had 888.com stubbornly plodded along in spite of the USA’s strong anti-online gambling stance and continued to process payments, they could have been liable for civil and criminal damages. They didn’t; and effectively kept their noses clean on USA soil.

The Nevada Gaming Control board was well aware of their involvement in the USA during online gambling’s infancy, but felt satisfied 888.com has acted in good faith since it ceased accepting USA players.

Now that USA online gambling is becoming fully legal, they have wisely stepped back in and won the approval of the Nevada Gaming Commission handily.

888.com recently posted it’s biggest profits to date, with a 13% jump in revenue in 2012, all of which was derived from legal European markets. That’s good enough for government in the USA, and their $0 in debt liabilities only further strengthens their financial credentials to operate with complete solvency on USA soil.

While 888.com might not have the balance sheet of other well established Las Vegas brands, don’t count them out: they’ got the IT knowledge, operating software, payment processing, and customer service know-how to compete with any Vegas Giant going online. They will undoubtedly jump into the race a few steps ahead, while their formerly land-based-only competition scrambles to hire qualified online gambling employees.

This development proves that nothing is absolute in USA law, despite the sanctimonious and far reaching activities of the DOJ and state civil courts. Leaving in 2006 was the right thing to do, and 888.com smartly bided its time waiting for the chance to come back.

Any past run ins with USA law enforcement before 2006 have been forgotten now that this big-money player is ready to do business AND pay taxes in the USA.

As the United States inches towards fully legal online gambling, one fact remains clear: payment processing is the name of the game.

In the early years of online casinos, processing payments was a breeze. In fact, prior to the 2000s, Paypal processed transactions to offshore casinos originating from the United States. Paypal later prohibited such transactions, but it does process money for Europeans patronizing legal online gambling websites across the pond. Paypal didn’t want to get in the way of the government and feared that charge backs would become a problem. They made the right choice then, but will they jump back in now that online gambling is legal in the USA?

As the USA government made it clear offshore gambling was unacceptable, payment processing became increasingly more difficult. Still, the industry persisted as payment processing moved out to third-party companies shuffling money between bank accounts, eventually leading to the balance sheet of the offshore gambling operation. Yet, the industry is still somewhat alive and well, although insiders readily admit moving money around is becoming more difficult.

Once Las Vegas and Atlantic City go live, payment processing for domestic United States online gambling might become an overnight cottage industry. Some casinos might be hesitant to process payments in-house, preferring instead to let other companies bear the risk. This makes sense given the touch-and-go nature of getting any new gambling business off the ground: since cash can’t be taken over the internet, sound low-risk financial processing is the only way to be profitable and stable.

The Nevada Gaming Control Board has already handed out a couple licences to payment processing companies. If in the coming years their services become redundant to the actual casinos/sportsbooks taking bets, they’ll be out of business. Wynn Resorts, the MGM Grand, or Caesar’s Palace “online” stand to make more money processing their own payments if it can be done without suffering heavy charge backs that damage their merchant status. Most gambling operators are wise enough to create separate corporate entities for developing a merchant profile for credit card processing, although it will ultimately be up to Visa, MasterCard, AMEX, and Discover whether or not they will process payments separate to regular casino transactions.

Third party payment processing in the USA online gambling market might be short lived. If the offshore operations stick around, however, payment processing will still be the lifeblood of the business, no matter what perks they throw at players.

Our guess is it will be a slow bleed until the USA government realizes that licensing, regulating, and taxing online gambling could be potentially more profitable than fully legalizing marijuana at the Federal Level.

Time is money. Time will (eventually) tell how money from USA players makes its way to newly minted online casino giants in Nevada and New Jersey. This less glamorous – yet virtually indispensable aspect of successful gambling banking – will be an important subtext in the weeks and months to come.